HR 4.0

Higher unemployment insurance premium for flexwork hardly leads to more permanent contracts

September 23, 2021 - 3 minutes reading time
Article by Reintjan Weeber

The increased unemployment insurance premium for flexible contracts last year has only motivated employers to switch to permanent contracts. Moreover, the uncertainty due to corona hardly seems to affect whether employers' hiring policy is changed. These are the main findings of an inventory of the effects of the Balanced Labor Market Act (in Dutch: WAB) on the labor market, conducted by Centric and its knowledge partner 2Xplain.

The WAB (‘Wet arbeidsmarkt in balans’), which was introduced at the beginning of 2020, is intended to encourage employers to offer more employees a permanent contract. The most important measure within the WAB is a significantly higher unemployment insurance premium for temporary and flexible employment contracts. Conversely, employers pay a lower unemployment insurance premium for employees with a permanent contract. The goal: more permanent employment contracts.

An initial poll by Centric and 2Xplain among fifty respondents shows that just under one in five employers has changed the hiring policy for new employees. It is striking that the size of the company does not seem to play a role in the companies that changed their policy: small employers change their policy just as little as large ones.

Especially in the retail, catering, and services sectors – sectors that have all been hit relatively hard by the corona measures – the uncertainty surrounding corona appears to affect the willingness to change the hiring policy. Traditionally, relatively many employees work with flexible employment contracts in these sectors.

‘Companies want to maintain a flexible shell’

Within various production sectors, where temporary and flexible employment contracts are also used relatively often, uncertainty surrounding corona does not play a role. Nevertheless, the higher unemployment insurance contribution hardly leads to a change in policy. A respondent from this angle also stated: “Companies want to maintain a flexible shell”.

Of the respondents to the poll from government employers, not even a single organization changed its hiring policy after the introduction of the WAB. This may be because government employers do not owe unemployment insurance contributions and therefore lack the financial incentive to conclude more and faster permanent employment contracts.

The first survey into the effects of the introduction of the WAB is too limited to draw firm conclusions. It can be a good starting point for further research. However, a careful balance can be drawn up: the premium differentiation, with a high premium for temporary and flexible employment contracts, seems to contribute only to a limited extent to the objective of the WAB: to ensure more permanent employment contracts.

Many pupils and students work in the retail and catering sectors heavily affected by the corona measures. The question is whether companies in these sectors will change their policy after reopening. On the other hand, without a financial incentive there seems to be no willingness at all from employers to offer more permanent employment contracts more quickly. In that sense, the WAB, as one of the measures from a larger package, does its job.

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